Private Health Insurance (Prudential Supervision) Rules 2016

Administered by Department of Health, Disability and Ageing

Legislation au F2016L01060 Rules Not in force Legislative Instrument

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PRIVATE HEALTH INSURANCE (PRUDENTIAL SUPERVISION) RULES 2016

EXPLANATORY STATEMENT

Prepared by the Australian Prudential Regulation Authority

Private Health Insurance (Prudential Supervision) Act, 2015 subsection 174(1)

 

Section 174(1) of the Private Health Insurance (Prudential Supervision) Act 2015 (the Act) provides that the Australian Prudential Regulation Authority (APRA) may make APRA rules prescribing matters required or permitted by the Act to be prescribed by APRA rules, or necessary or convenient to be prescribed for carrying out or giving effect to the Act.

 

The Private Health Insurance (Prudential Supervision) Rules 2016 (the instrument) will commence on the day after they are registered on the Federal Register of Legislative Instruments.   

 

The Instrument revokes the Private Health Insurance (Prudential Supervision) Rules 2015 (previous instrument).  

 

The instrument differs from the previous instrument by incorporating a new Rule 6A.  Rule 6A deals with two matters.

 

Firstly, Rule 6A(1) specifies that donating to medical research is a specified purpose under subparagraph 28(2)(a)(iv) of the Act.  As such, the operation of Rule 6A(1) is to enable health benefits fund assets to be applied for the purpose of donating to medical research. 

 

Secondly, Rule 6A(2) operates to ensure the validity of transactions involving health benefits fund assets which were applied for donations to medical research from 1 July 2015 to the commencement of the instrument.  Rule 6A(2) is made in accordance with paragraph 29(1)(b) of the Act which allows APRA to include a class of transactions in APRA rules to give effect to transactions entered into in contravention of section 28 of the Act.  Rule 6A(2) specifies that any donations made from the assets of a health benefits fund to medical research in the period from 1 July 2015 until the commencement of the instrument are permitted under the Act.

  1. Background

As a consequence of private health insurance functions being split between the Department of Health (DoH) and APRA, the legislative provisions governing the expenditure of health benefits fund assets were removed from subsection 137(10) of the Private Health Insurance Act 2007 (PHI Act) and remade in section 28 of the Act.

 

Section 28 of the Act contains provisions relating to the expenditure and application of assets of health benefits funds. A private health insurer must not apply, or deal with, assets of a health benefits fund, whether directly or indirectly, except in accordance with Part 3, Division 3 of the Act.  Further to those purposes specified in subsection 28(2) of the Act, the assets of a health benefits fund may also be applied for a purpose specified in APRA rules as per subparagraph 28(2)(a)(iv) of the Act.    

 

In June 2015, the DoH amended the Private Health Insurance (Health Benefits Fund Policy) Rules 2007 (No. 3) to reflect the changes made to the PHI Act. One of the amendments removed the reference that permitted donations to medical research from the assets of the health benefits fund.  Rule 7 of these rules previously provided that donating to medical research is a purpose specified for the purposes of subparagraph 137-10(2)(a)(iv) of the PHI Act. 

 

The original intent was to transfer this provision to a rule made by APRA. However, this change was overlooked during drafting.  

2.                   Purpose of the instrument

The purpose of the instrument is to rectify the abovementioned omission by enabling health benefit fund assets to be applied for donations to medical research and validating any such application from 1 July 2015 to the commencement of this instrument.

 

In particular:

 

  • Rule 6A(1) of the instrument prescribes that donating to medical research is a purpose specified for the purposes of subparagraph 28(2)(a)(iv) of the Act and as such the assets of a health benefits fund may be applied for the purposes of donating to medical research.  

 

  • Rule 6A(2) of the instrument validates donations made in the period from 1 July 2015 until the commencement of the instrument. This ensures that any private health insurer that has made a donation to medical research from the assets of its health benefits fund during the period will not be in breach of the Act.

3.                   Consultation

APRA consulted with the DoH on the drafting of this proposal.

 

APRA’s previous consultation materials made it clear that it was APRA’s intention to ensure that the private health insurance prudential framework continued substantively unchanged after transition to APRA. Given this, no further consultation was undertaken. 

 

4.                   Statement of compatibility prepared in accordance with Part 3 of the Human Rights (Parliamentary  Scrutiny) Act 2011

A Statement of compatibility prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 is provided at Attachment A to this Explanatory Statement.

 

 


ATTACHMENT A

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Private Health Insurance (Prudential Supervision) Rules 2016

This Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (HRPS Act).

Overview of the Legislative Instrument

The Private Health Insurance (Prudential Supervision) Rules 2016 prescribe matters applicable to private health insurers.

The instrument sets rules in relation to the expenditure and application of health benefits funds, restructure of health benefits funds, mergers and acquisitions of health benefits funds and reporting and notifications requirements. 

Human rights implications

APRA has assessed this Legislative Instrument and is of the view that it does not engage any of the applicable rights or freedoms recognised or declared in the international instruments listed in section 3 of the HRPS Act. Accordingly, in APRA’s assessment, the instrument is compatible with human rights.

Conclusion

The Private Health Insurance (Prudential Supervision) Rules 2016 are compatible with human rights because it does not raise any human rights issues.

 

Overview

The Private Health Insurance (Prudential Supervision) Rules 2016 were enacted under the authority of the Private Health Insurance (Prudential Supervision) Act 2015. This legislation was introduced to address a gap in the prudential supervision of private health insurance funds, particularly concerning the application of health benefits fund assets. The Australian Prudential Regulation Authority (APRA) was tasked with making these rules, which were designed to ensure that the assets of health benefits funds are used appropriately and in compliance with the Act. The instrument addresses the inadvertent omission of permitting donations to medical research from health benefits fund assets, rectifying this by explicitly allowing such donations and validating any donations made since 1 July 2015 up until the rules' commencement. APRA, in drafting these rules, consulted with the Department of Health and ensured that the new rules would not alter the existing prudential framework substantively. Additionally, a Statement of Compatibility was prepared to confirm that these rules do not infringe on any human rights as recognised by the Human Rights (Parliamentary Scrutiny) Act 2011.

Scope and Application

The Private Health Insurance (Prudential Supervision) Rules 2016 apply to private health insurers in Australia, focusing on the expenditure and application of assets within health benefits funds. This legislation is a subordinate instrument of the Private Health Insurance (Prudential Supervision) Act 2015 and is implemented by the Australian Prudential Regulation Authority (APRA). The Rules aim to provide clarity and legal certainty regarding the use of health benefits fund assets, particularly for donations to medical research, which were previously omitted from the legislative framework. Rule 6A(1) explicitly permits the application of health benefits fund assets for medical research donations, aligning with subparagraph 28(2)(a)(iv) of the Act. Rule 6A(2) further ensures the validity of donations made from 1 July 2015 to the commencement of these rules, thus protecting insurers from potential breaches of the Act during this period. The instrument has a national reach, applying across all states and territories in Australia. While the Rules set the primary framework, APRA retains the authority to further specify details through additional subordinate instruments as necessary.

Key Provisions

The Private Health Insurance (Prudential Supervision) Rules 2016 (the Rules) establish specific requirements for the expenditure and application of health benefits funds by private health insurers. The key operative sections of these Rules include Rule 6A, which specifies that donating to medical research is a permitted purpose for the use of health benefits fund assets. Rule 6A(1) explicitly allows these assets to be applied for donations to medical research, while Rule 6A(2) ensures that donations made from 1 July 2015 to the commencement of these Rules are validated and not in breach of the Act. These provisions aim to clarify and enable the application of health benefits fund assets for medical research donations, correcting an oversight in previous legislation. The Rules impose several obligations on private health insurers. Primarily, they must ensure that the assets of health benefits funds are used only in accordance with the provisions of the Act and the Rules. This includes adherence to the specified purposes for asset application, with Rule 6A(1) now explicitly including donations to medical research. Insurers must also ensure that any transactions involving the use of these assets for donations made prior to the commencement of these Rules are validated under Rule 6A(2). This obligation is crucial to maintaining compliance and ensuring that the assets are used in a manner consistent with the legislative framework. Any breach of the provisions set out in these Rules could lead to significant consequences. While the Rules themselves do not explicitly outline penalties, the overarching Private Health Insurance (Prudential Supervision) Act 2015 provides for various enforcement mechanisms. Breaches of the Act can result in civil penalties, which may include fines, and criminal penalties for more serious offences. The specific penalties are determined by the severity of the breach and are outlined in the Act. Compliance with the Rules is therefore essential to avoid these potential consequences and to maintain the integrity of the private health insurance system.

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Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.